Understanding The Market And Trading A NSE Initiative

Soch Kar Samajh Kar Invest Kar

Understanding The Market And Trading A NSE Initiative


Welcome to the wonderful world of investing Congratulations. You’ve taken the 1st step to the world of financial planning. The new inter-connected world offers range of products to suit your investment needs which can help you in optimizing returns on savings.

As a leader in the financial markets, NSE is happy to partner with you on your journey. The following pages provide you information which would be of great use to you in safeguarding your interest.



A good broker is a like an asset, he can help you benefit from the market. You would choose a broker just like you would choose a life partner.

Here are some useful pointers:

• Identify SEBI registered Stock Brokers keeping your personal need like location, investment value, brokerage fee etc., 
• Find out the various products that the Broker is authorized to service  
• Find out how to place orders, payment of margins, securities transfer, pay-in and pay-out etc.  
• Find out how you would receive confirmation about your transactions, statements etc.
• Do a background check on clients serviced, regulatory actions, if any.
• Know how important you are to them

Considering the above, choose the intermediary that best fits your need.


Trading. The Before and After


For any trade to be successful, it's important to be diligent not just while you trade but also before and after each trade is executed.

Before Trading

• Decide your investment objectives and risk appetite
• Do study information on Company that you choose to invest in
• Check the information on company by going through Equity Research
• Reports available on Exchange website
• Do not be misled by market rumours or advertisements that promise high returns

After Trading

• Insist on receiving contract note issued within 24 hrs. from your broker
• Verify your trades at www.nseindia.com
• Register your mobile or email for trade alerts 
• Insist on periodical statement of accounts. In case of any discrepancies bring it to the attention of your broker immediately.
• Make sure that all payments and securities transfer are between you and the Broker only and not any other third parties

Avoiding the instant wealth trap

It's easy to get lured with promises of unusually high returns within a short time. As a smart investor you need to exercise common sense and caution. Here are some simple things to guard against 

• Promise of unrealistically High Return
• Promise to invest in opportunities based on secretive information
• Getting euphoric about certain companies and investment
• Your involvement not required in decision to buy or sell
• Guaranteed high returns (like double in three months)
• Promise of no risk, complete capital protection
• Statements like life time opportunity requiring you to sign papers and part with money immediately
• Overly consistent returns even during adverse market conditions

Power of Attorney – 

• Should be a tool that benefits you and not tie you down.
• Power of Attorney is a legal document giving legal authority to another person to operate your account as per the instructions contained in the Power of Attorney.
• PoA is not mandated by SEBI or the Exchange.
• In case you choose to give PoA for convenience and hassle-free transactions through your Stock Broker, please make sure that you give PoA in the name of a SEBI registered Stock Broker only. Do not give PoA in the name of any other person like employees, dealers, associate entities etc.
• PoA should be generally given for a limited period. The period should never be left open-ended in the hand of your broker or member.
• The choice of renewal or otherwise should be exercised after reviewing the manner in which PoA has been put to use by the PoA holder.

Services and Products offered by NSE

The National Stock Exchange (NSE) operates a nation-wide electronic market offering the following:

• Stocks Market
• Debt Market
• Currency Futures & Options
• Interest Rate Futures
• ETF-Gold, Equity & Liquid
• NCFM – NSE financial certification course
• Nifty 50, Junior Nifty, CNX 100 and India VIX

Today, the NSE network stretches to more than 1500 locations in the country & supports more than 2,30,000 terminals


NSE Website

The NSE website is a repository of important information that will help you navigate the market with ease, it contains useful informations like:

• Corporate Announcement, Financial results, Board meetings,
• Company contact details, Live Markets, graphs, historical data and indices.
• Equity Research Report on Listed Companies carried out by reputed rating agency
• Product offering – Equities, Mutual Fund, GOLD ETF, Currency, Debt & Derivatives
• Investor Education – Publication & Research initiatives
• Exchange Holidays, Circulars, Regulations, NCFM Certification,
• Publications and NSE Group Companies

Important links

• Find your Nearest Broker – A facility to find your nearest broker:
• Online Charts – helps you to track the price movement, comparative charts
• Sparkline & Marke Map – live prices of stocks & sectoral performance
• Registration for Seminars & e-newsletter
• A SBA form – Online Application form for IPO
• Trade Verification, Alerts on mobile and email
• Mobile Trading Application – trade on the move
• Investor Grievance Cell – A mechanism to resolve investors grievance and complaint.

Trade Verification for your protection

NSE provides a trade verification facility to you for your ease and convenience, free of cost. This information can be received by you both through SMS or an email. Registered users will receive SMS on the designated mobile number at the end of each trading day giving a summation of the trading activity. Besides, an email will also be sent on the registered email id providing the detailed trading activity.

Please visit the NSE website www.nseindia.com to register yourself for this service.

Investor Obligations & Rights

Obligations

• Get trades executed in Unique Client Code (UCC) allotted to you.
• Understand the Risk Disclosure Document and voluntary conditions being agreed with the member.
• Pay margins, funds and securities for settlement on time.
• Verify details of trades, DP account for funds and securities movement.

Rights

• Get Unique Client Code (UCC), copy of KYC and other documents executed.
• Get Contract note for trades executed and details of charges levied.
• Receive funds, securities and statement of accounts on time from trading member.

Contact Details of NSE offices:

NSE - Corporate Office
National Stock Exchange of India Ltd., Exchange Plaza, C-1 Block G, Bandra- Kurla Complex, Bandra (E), Mumbai-400051. Tel: 022-26598100.

NSE - Branch Offices
AHMEDABAD: National Stock Exchange of India Ltd., Office No. 304/305 , GCP Business Centre,
Opposite Memnagar Fire Station, Memnagar, Ahmedabad-380052. Tel: (079) 26420481/26420482
CHENNAI: National Stock Exchange of India Ltd., 2nd Floor, Ispahani Centre, Door No 123-124,
Nungambakkam High Road, Nungambakkam, Chennai-600034. Tel: 044-28332500/01.
MUMBAI (WRO): National Stock Exchange of India Ltd., 6th Floor, Kohinoor City, Tower-1,
Commercial-II, Kirol Road, Off. L.B.S. Marg, Kurla (W), Mumbai-400070, India. Tel: 022-25045258 to 62.
DELHI: National Stock Exchange of India Ltd., 4th Floor, "Jeevan Vihar Building", Parliament Street,
New Delhi-110001. Board No: 011-23741741/49393000.
HYDERABAD: National Stock Exchange of India Ltd., H.No:3-6-322, Mahavir house, 2nd floor,
Chamber No 203 & 204, Basheerbagh, Hyderabad-500029, India. Tel: 040-23227084/85.
KOLKATA: National Stock Exchange of India Ltd., First Floor, Park View Apartments, 99, Rash Behari
Avenue, Kolkata-700029. Tel: + 91 33 40 400 400 (Board).

Happy Investing

Corruption topmost risk to Indian business environment

Corruption topmost risk to Indian business environment: FICCI

New Delhi, March 27 (IANS) A leading industry body on Friday ranked 'corruption, bribery and corporate frauds' as the topmost risk that impact Indian business environment.

The Federation of Indian Chambers of Commerce and Industry (FICCI) revealed the topmost risk to the Indian business environment in the latest edition of 'India Risk Survey 2015' (IRS 2015) survey.

On the 'corruption, bribery and corporate frauds' as the topmost risk, the survey said the recent news coverage and public uproar related to various cases involving major corporate houses justifies this trend as having the highest mind recall value and has also been assigned the greatest concern in recent times.

"Continuing with the trend evident from last year, the focus of the respondents for risk analysis continues to be on how the entire gamut of corruption, scams and corporate frauds are affecting the economy," the survey said.

The survey was conducted jointly by FICCI and Pinkerton Corporate Risk Management.

According to the industry body, the objective of the survey is to inform and sensitise all stakeholders about the emerging risks to the developing economies like India.

Apart from 'corruption, bribery and corporate frauds', the survey revealed that 'information and cyber insecurity', 'terrorism and insurgency', 'business espionage' and 'crime' as other major risks to business environment in India.

The survey said that risks of 'strikes, closures and unrest' and 'political and governance instability', which were earlier in the top five risk brackets have dropped in the rankings to 6 and 11th positions respectively.

"This is a major shift in the yearly trends primarily due to the positive impact caused by a perceived stable government coming to power at the centre post the 2014 general elections," the survey said.

The industry body pointed out that the survey encompasses 12 key risks that pose a threat to the entire economic system of the country; and though each risk is rated on a mutually exclusive basis.


Happy Investing
Source : Yahoofinance

Real Estate Investment-Know its Risks and benefits

Real Estate Investment-Know its Risks and benefits

The real-estate market is a high-risk market that has been aggrandized purely by how unexpectedly large its returns can be and is dependent largely on perception. For instance, someone who bought a house in Whitefield in Bengaluru in 2005 has seen his apartment's price quadrupling to give huge returns. However, many industry experts and portfolio advisors suggest that even unexpectedly large returns are on expected lines when one factors in inflation, increasing guidance values and more. Keeping tabs on ready reckoner rates in Mumbai for two decades, for instance, can give you a fair idea of what to expect in the next ten years or so. In fact, the most unexpectedly great returns are those that are made in a short span of time, such as 5 or 6 years. This obviously involves huge risks as well.

Investing in real estate
Investing in real estate involves a different approach from buying a house. In many cases, advisors say that people who buy houses rarely sell them, due to the emotional value of owning a house. Investing in real estate on the other hand, involves having more flexibility and exercising practical decisions. Unlike other investments, real estate involves a lot of time, money and commitment and the extra returns justify the extent of the investor's involvement. Unlike the stock market, which shows a point-by-point and day-to-day performance of the market, the real estate industry is decidedly more difficult to track. Real estate investment also means less liquidity and the profits that are made are not booked immediately as in the case of equities or selling stocks.

Any form of real estate, whether it involves development of property, private real estate funds, investing in houses or more, is dependent on risk that can hopefully translate to returns that matter. While it is important to be careful in terms of making a low-risk purchase, in this scenario, it is important to invest in or buy property with a clear view of its value and appreciation in the future, whether that appreciation is significant or huge.

Unlike buyers of homes who are cautious, investors are willing to take the plunge and invest in different types of property. Residential real estate, for one, has been growing steadily in most markets in India. Despite being overvalued, the residential market in a place like Delhi or Mumbai, for instance, do not get corrected as severely as other assets and hence having your money in a property is a good bet, as long as you are fixed on getting those extra returns. Even in 2011, which was a bad year for the economy, prices did not plummet in the eight major real estate markets in the country. Even with places like Faridabad, Gurgaon and Navi Mumbai emerging as alternative markets, the prices in the central business districts in the major cities are stable and the demand is high. Between 2008 and 2012, despite the downturn in the markets due to the 2008 financial crisis, real estate in India remained stable, with 11 out of 15 Residex cities giving positive returns in that time frame.

The risk associated with under construction flats
Real estate investment involves minimizing risks as much as possible and it is important to keep in mind that buying an under-construction flat, for instance, involves the risk of credit and lending money to a developer without the knowledge of whether or not he or she will finish the project on time. In fact, industry experts say that given the amount of risk you incur when buying an under-construction flat, your returns should be better. It is always imperative to keep an eye on the returns when investing in real estate, for nothing else is as important.

Buying a house is a societal need as opposed to an investment, which focuses on the monetary aspects entirely. Even among investors, the ones that invest in thousands that turn into millions, the returns come not immediately but after a certain point of time, and liquidity becomes tight. Active investors, on the other hand, understand the risk and the need to diversify their portfolios and stay in the game at all times.

The ground reality of investment in real estate is that even the high returns are those that are to be expected if all other calculations are made prudently. For instance, if you purchase a property in 2015 for Rs 2 crore and this grows four times in four decades, this appreciation is not unreal keeping in mind inflation, the capital gains tax, registration fee and all the other investments that go hand-in-hand with it.


Happy Investing

What Is Happening In The Markets ...... Mar 2015

What Is Happening In The Markets ......


Indian equity markets witnessed some volatility after the Union Budget as investors booked some profit post the event and after the significant run up witnessed last year.

The Union Budget has paved the way for the increased expenditure on building infrastructure, domestic manufacturing and increased foreign capital. All these measures will lead to a structural improvement in economic growth and a sustained improvement in corporate earnings after a few quarters.

The Finance Minister has shown pragmatism in doing away with Wealth Tax and increasing the surcharge on the super rich. Even though the budgeted fiscal deficit for FY16 has been pegged at 3.9% vs. expectation of 3.6%, the incremental deficit is being earmarked for infrastructure spending while a concrete mechanism to dissuade black
economy is encouraging. The Finance Minister avoided fulfilling the short-term wish-list of many and focused on growth, investments and social objectives.

The latest quarterly results of Q3FY15 saw more disappointments than positive surprises with most companies reporting a subdued performance. The management commentary, however, was neutral to positive, with most companies optimistic on a revival of the capex and investment cycle over the medium to long term, going forward. The Sensex (ex-banks & NBFCs) topline declined 3.0% YoY. EBITDA
margins came in muted despite companies benefiting from lower commodity prices (RM as a percentage of sales came in at 42.2% in Q3FY15 vis-à-vis 46.0% in Q3FY14) on account of negative operating leverage realised due to subdued sales. The Sensex PAT in Q3FY15 was down 10.9% YoY. PAT de-growth was largely on account of a fall in operating profit and rise in depreciation (up 9.6% YoY due to a
change in Company’s Act).

Outlook

The focus of the Union Budget on infrastructure development, domestic manufacturing, encouraging foreign capital and ease of doing business
are measures will go a long way in improving the structural medium term outlook for the economy.

Although earnings growth may remain muted in the next couple of quarters, it is expected to improve significantly in FY17 and FY18. The same may keep market sentiments upbeat.

The structural medium to long term outlook for the Indian equity market remains positive on lower commodity prices, particularly crude oil, expectations of further rate cuts by the RBI and policy announcements by the government to spur investments and, consequently, overall growth.

Volatility, however, in the near term is likely to increase on global cues especially at current higher levels. Investors should avoid putting lumpsum amounts at current levels. However, any sharp correction should be utilised to accumulate and follow a buy on dips strategy.

Caution is required in midcaps and small caps mutual funds as they have significantly outperformed large caps in the current market rally since September 2013. Therefore, if the overall market volatility increases, midcap and small caps may underperform.


Happy Investing
Source : Icicidirect.com 

Market Outlook … March – April 2015

Market Outlook … March – April 2015

 

Equity benchmarks extended losses for third consecutive week on back of weak global cues amid geo-political tensions after a Saudi Arabia led coalition of Arab nations launched air strikes on Yemen. The NSE Nifty closed in red in all five trading session during previous week. The Broader market also witnessed profit booking as the BSE Mid cap and BSE Small cap closed down by 2.5% and 3.9% respectively indicating broad based profit booking

• The 30 share S&P BSE Sensex closed at 27458, down by 802 points or 2.84%, while the NSE Nifty settled at 8341, down by 229 points or 2.68% for the week.
• Amid Nifty constituents Bank of Baroda, BHEL, Coal India, HDFC, Hindustan Unilever, ITC, PNB, Reliance, State Bank of India, Tata Steel, Tata Power and Wipro were major draggers whereas Lupin, BPCL and M&M where major gainers.
• The central government concludes the telecom spectrum with total 1, 09, 875 crore to be mopped up from telecom operators over the life of the spectrum.
• Among the telecom operators Idea bid the highest (| 30,307 crore), followed by Vodafone (25,960 crore), Bharti Airtel (29,130 crore) and Reliance Jio (10,078 crore) among others. Immediate payout to the central government from the telecom spectrum auction stood at 28,873 crore.
• Crude prices closed at about US$ 56.0/barrel, up 5.3% during the week. Gold closed the week at US$ 1203.0 $/ounce, up 1.7% during the week. Bond yields inched slightly higher to 7.8%, up 3 bps during the week.

Outlook For April

 

• Price action during the week resulted in stronger bear candle with small shadows in either direction indicating continuation of profit booking trend towards expiry of March series of derivative contracts. It carries a lower high lower low as compared to the previous week and settled at the lowest level since January 15, 2015 signalling continuation of the corrective phase.
• The violation of February 2015 low (8470), which also coincided with the 100 day EMA (8490) and medium term rising trend line in place since May 2014, triggered a sharp sell off on Thursday.
• The current fall from life-time high of 9119 is now the largest in magnitude terms in the entire up move since August 2013 which signals a broadening profit booking trend.
• The index, however held the bullish gap (8380-8277) formed on January 15, 2015 post the sudden first rate cut by RBI. Only a follow through weakness below last week’s low (8269) will see the index extend the current decline towards the next major support area at 8100 in the short-term.
• The short-term momentum indicators are exhibiting deeply oversold conditions, which may lead to some range bound price action after previous three weeks’ steep decline in upcoming truncated week. However, the index will not be out of the woods until we see a faster retracement above previous week’s high of 8627.
• We believe the medium-term floor for the Nifty is placed near 8100 being the 200 day EMA. A pullback to the long term average after a span of over a year is bound to trigger value buying. Further, the current fall from life-time high of 9119 will also equal the magnitude of the 2013 fall around 8000. Based on these observations, we believe the current decline will get arrested near the 8100-8000 band.
• Important data releases in India next week- Fiscal Deficit (Feb), HSBC India Manufacturing PMI.
• Important data releases in US next week- Personal Income, Pending Home Sales MoM, Consumer Confidence Index (Mar), MBA Mortgage Applications (Mar 27), Construction Spending MoM (Feb), Initial Jobless Claims (Mar 28), Trade Balance (Feb).
• Important data releases from the Eurozone next week- Unemployment Rate (Feb), CPI Core YoY (Mar), Markit Euro zone Manufacturing PMI.
• Important data releases from Asia next week- Japan: Industrial Production MoM (Feb). Housing Starts YoY (Feb), Construction Orders YoY (Feb) China: Manufacturing PMI (Mar), Non-manufacturing PMI (Mar), HSBC China Composite PMI (Mar).

Happy Investing

Source : Icicidirect.com

Market is Tanking .... What do the experts say

Market is Tanking .... What do the experts say


Cut defensives, add banks;mkt can rise 10% in 1 yr

Jan Dehn Head-Research, Ashmore Investment Management is not perturbed by the intense sell-off in Indian equities. The Indian story is far from over, he tells CNBC-TV18 adding incremental government spending can add 10 percent to indices in one year.

Jan Dehn, Head-Research, Ashmore Investment Management is not perturbed by the intense sell-off in Indian equities. The Indian story is far from over, he tells CNBC-TV18 in an interview adding government spending, particularly in infrastucture, will make Indian equities attractive again. Indices can rise as much as 10 percent in 12 months on policy actions and if GST is implemented one can expect 24 percent return on investments within 2 years, he said. While advising investors to continue accumulating on dips as the market is poised to go up, Dehn revealed he likes cyclicals and financials where he sees a lot of value. "See value in downstream oil companies and industrials as well," he said while warning one to cut exposure to healthcare and defensives. He finds the government support to Gas-fed power stations a big positive for the energy sector.


Right time to create long only portfolio

One should now look at investing into quality stocks from the private banking space that have fallen anywhere between 10-30 percent and whose business models look robust, says Deven Choksey of KR Choksey Shares.

Deven Choksey of KR Choksey Shares strongly believes that the current market fall is purely technical because there is nothing fundamentally wrong. According to him the selling pressure could be because FIIs are reducing their weight in the market and are offloading their longs. They are adjusting their books, he adds. For him this fall provides an excellent opportunity for those who want to create long only portfolio. One should now look at investing into quality stocks from the private banking space that have fallen anywhere between 10-30 percent and whose business models look robust. Auto space also looks attractive post the correction and one can even look at the capital goods space, especially stock like Larsen post its correction.


JP Morgan's 6 sentiment indicators bulls need to be wary of

Indian equities have been an outsized beneficiary of easy global liquidity and soft global growth. Consequently FIIs now own 21% of Indian Equities vs. 14% pre-global financial crisis, cautions JP Morgan

Equity market sentiment indicators are beginning to suggest some caution, says brokerage house JP Morgan. "Our money flow indicator suggests increased interest in export oriented sectors and defensives over the last month. Cyclical sectors and commodities saw outflows," says the JP Morgan note to clients. Other indicators that bulls would be worried about: (Extracts from the note) * Insiders turned net sellers over the month. * Delivery volumes reduced. * EMBI (Emerging Markets Bond Index) spreads widened. * In the Domestic Rates markets, the Yield curve remains inverted, as the short end is pricing in the year-end seasonality,” says the note. On the positive side, India’s vulnerability to Fed tightening has diminished, feels the brokerage. And yet, India remains vulnerable to any upheaval in global markets because of high exposure to Indian equities by FIIs.

(Extract from the note) "Indian equities have been an outsized beneficiary of easy global liquidity and soft global growth. Consequently FIIs now own 21% of Indian Equities vs. 14% pre-global financial crisis. Also, the extent of overweight positions on Indian Equities that Emerging Market investors are currently running is at an all time high – 12% vs. the benchmark weight of 7.7%."



Market nearing end of sell-off now; like pvt banks

According to Sanjay Dutt, the stocks of several companies had become expensive with their prices running way ahead of fundamentals but with expectation of a further correction, market must use that as a buying opportunity now

The Indian market saw immense selling pressure on Thursday with the Nifty closing expiry below 8350-mark and the Sensex shedding 654 points to close at 27458 led by geopolitical tensions. Banking & financials and technology stocks led the massive fall. Speaking to CNBC-TV18, Sanjay Dutt of Quantum Securities said the market is nearing the end of the sell-off now though there will be some more correction but that will not be very deep. The market and the experts were building too many positives into the Budget and the Reserve Bank o India action. According to him, the stocks of several companies had become expensive with their prices running way ahead of fundamentals but with expectation of a further correction, market must use that as a buying opportunity now. Adding to the discussion, Deven Choksey, MD, KR Choksey Securities said the exposure of foreign investors towards India is quite high. He believes players are off-loading long positions in the market ahead of the truncated trading week. He likes private sector banks though he’s expecting muted performance by public sector banks going ahead.




Stay invested in SBI

Hemen Kapadia of KR Choksey Securities told CNBC-TV18, "I would suggest a hold on State Bank of India (SBI) with stoploss of Rs 252 and a target of Rs 283 simply because even if one takes a timewise retracement of the fall, I think once it bottoms out the bout would be either 38.2 or 50 percent retracement of the fall, which is down from Rs 335, so they should be at least some bounce coming in.” “If it takes out Rs 291 then one can have a look at around Rs 305 but after Rs 283, Rs 291 needs to be taken out from a weekly point of view,” he added.


Buy on dips; earnings to stabilise soon

In telecom, Anup Maheshwari of DSP Blackrock Investment Managers says the sector is yet to see pricing power. He is waiting for revenue per minute (RPM) to increase in telecom to justify capex in auctions.

There are too many factors in the short-term to predict the near-term trajectory, is the word coming in from Anup Maheshwari, executive vice-president and head of equities at DSP Blackrock Investment Managers. The first quarter is usually a little soft for the midcaps, but they come back in the subsequent quarters, he says. But earnings overall have been disappointing in the last few quarters, he adds. However, he believes that earnings will normalize soon and it is a buy on dips market. In telecom, he says the sector is yet to see pricing power. He is waiting for revenue per minute (RPM) to increase in telecom to justify capex in auctions. Maheshwari also expects the government to start spending aggressively from next month.


Next 12 months 'very painful'; buy these stocks

Valuations for Indian market have gotten out of hand and the next 12 months could be “very painful” for some parts of it, believes Dimensions Consulting’s Ajay Srivastava. But in an interview, he added that pockets of opportunities exist.

Valuations for Indian market have gotten out of hand and the next 12 months could be “very painful” for some parts of it, believes Dimensions Consulting’s Ajay Srivastava. In an interview with CNBC-TV18’s Latha Venkatesh and Sonia Shenoy, Srivastava said that economy looked “fundamentally positive” in the wake of reforms undertaken by the government, but the steps will take time to percolate down to earnings. “Some correction has already happened. More has to happen,” he said. “The investor should reallocate his portfolio away from stocks that have made him profits. Also, don’t make large commitments [to stocks].” But still, the analyst said pockets of opportunities existed within select stocks and sectors. He picked out telecom stocks as one that are poised to double in the next two-three years. “After the spectrum auction, their cost of material has become fixed. They will have assured revenue. They can’t be many new players in the market,” he said, adding that the shift in dynamics will cause valuations for these stocks to go from the 2 to 4 times price-to-book they are currently at, to 7 to 10 times. Metals, minerals and large industrial companies were also stocks he picked out to gain from the increased economic activity that will take place from the coal auctions as well as the broad pick-up in activity. “The stocks are cheap and under-owned. Pricing has reached extraction cost levels. It's a bottom or thereabouts for these,” he said.


This correction not even close to what is expected

The disconnect between corporate India and stock market is more evident now which is why this correction will get ferocious in days to come, says Nilesh Shetty, Associate Equity Fund Manager at Quantum AMC.

Nilesh Shetty, Associate Equity Fund Manager at Quantum AMC says the market will correct a lot more from the current levels as the reality at the ground level — absence of capex, demand and good earnings — has begun to unfold. The disconnect between corporate India and stock market is more evident now which is why Quantum prefers to stay in cash for a fairly long time. "It is one of the highest you have seen in the history of the fund and we continue to wait," he said.

Our sense it is not even close to a decent correction which we expect. The correction has been primarily the levels that the market sort of rallied to in anticipation of a transformational Budget. But once that Budget never materialised we had given up those gains and we are back to sort of January 2015 levels. Again if you sort of go to corporate India and talk to them at the ground level, things remain very weak. Demand remains weak, no fresh capex is coming through and the balance sheet of corporate remain fairly weak. So our sense for a long time has been that there has been a substantial disconnect between what is happening with the stock market and what is happening at Corporate India. At some point the realisation has to feed itself into the stock prices so cash levels for us remain fairly elevated for a longtime. It is one of the highest you have seen in the history of the fund and we continue to wait. Our sense is at least if the prices do not correct we could have time corrections on our hands and at least this year could be sub par returns for the market.


Happy Investing
Source : Moneycontrol.com

Invest in Banking ETFs

Invest in Banking ETFs Banking sector is considered to be the barometer of economy and has the highest weightage in the Sensex. Hence it generally outperforms whenever the economy is improving and the equity market is in an upturn. The government's plan to bring down the stake in PSU banks to 52%, restructuring windows issued by the RBI for existing and new infra loans, improving growth and incremental profits, capital adequacy at comfortable position for private banks etc. can help the banking stocks perform better at the current scenario.

We, therefore, believe as the economy revives much of the impediments faced by the banking sector slower credit pick-up, deteriorating asset quality and a fall in profitability may all come to an end. In the past, the banking sector has outperformed the BSE Sensex in a growing market. We believe the same may happen over the next two to three years. Since these are sectorial funds, investors can, therefore, consider allocation of some part of their overall equity portfolio to these funds.

Some of the better performing and our research recommended banking funds are:

Fund name 6 M 1 Yr 3 Yrs 5 Yrs Exit Load (%) ICICI Prudential Banking & Financial Services Fund 22.20 86.80 31.70 21.60 (Period up to 12 Months) 1 Reliance Banking Fund 22.80 85.50 25.70 20.20 (Period up to 12 Months) 1 UTI Banking Sector Fund 19.80 73.70 20.50 15.80 (Period up to 548 days) 1

Hot To Build An Investment Portfolio For Retirees?

Hot To Build An Investment Portfolio For Retirees?


This article is for the investors looking to invest in American markets.

Investors managing their money through retirement often have different needs than during their growth and accumulation years. Often times they are more focused on income and capital preservation rather than taking the risk of seeing their hard earned capital evaporate. With that goal in mind, building out a diversified portfolio using both core and strategic positions can enhance your dividend yield and provide a strong base for steady returns.

Strategic or tactical holdings can be an excellent way to focus a portion of your portfolio towards an area of the market that you feel offers a unique value proposition. By incorporating these themes in an ETF, you are able to access a low-cost basket of securities with transparency and daily liquidity.

For the equity sleeve of a retirement portfolio, an excellent strategic opportunity is through the Cambria Shareholder Yield ETF (SYLD). This actively managed basket of 100 domestic stocks is selected according to companies that are paying a dividend, buying back shares, or paying down debt on their balance sheets.

The end result is a unique basket of high quality stocks that don’t necessarily overlap a traditional high dividend yield or dividend growth-oriented index. The portfolio is primarily centered around large-cap stocks, with approximately 25% geared towards small and mid-cap names. Financials, technology, and consumer discretionary companies make up the top three sectors in SYLD.

Another unique income investment is the iShares Morningstar Multi-Asset Income ETF (IYLD). This ETF uses a “fund of funds” approach to select various stock, bond, and alternative asset classes in well-known dividend paying sectors.

IYLD should primarily be used as a strategic bet on credit as the underlying components are weighted more towards high yield corporate bonds, mortgage REITs, and dividend paying stocks. There is also some modest exposure to treasury and investment grade bonds to help balance volatility as well.

Because of the credit heavy exposure, the 12-month trailing yield on this ETF is currently at 5.50% and income is paid monthly to shareholders. A sustained low interest rate environment and continued strength in equities will provide a nice environment for IYLD to prosper.

Lastly, the iShares U.S. Preferred Stock ETF (PFF) is an area of the market that is worth noting for a retirement portfolio. I classify PFF in the “alternative income” category because of its equity and debt characteristics. Preferred stocks pay a fixed dividend, but place you higher on the capital structure than common stock holders.

Alternative asset classes often have above-average yields and non-correlated returns that make for excellent strategic positions to balance out traditional stock and fixed-income holdings. PFF has a current 30-day SEC yield of 5.60% and has shown itself to be a worthy holding for income and capital appreciation as interest rates have continued to decline.

The Bottom Line

All three of these ETFs offer the opportunity to shift a portion of your assets towards a unique area of the income-generating market. The key to implementing them successfully in your retirement portfolio is to pair them with traditional dividend paying stock or fixed-income exposure. This will help minimize volatility and provide greater overall balance to your investment mix.

The post 3 Strategic ETFs For Retired Investors appeared first on FMD Capital Management.

Happy Investing
Source Investopedia

 

Becoming An Elite Trader: The Game Plan

Becoming An Elite Trader: The Game Plan


Millions of traders test their skill in the financial markets each year, but most are destined to lose their stakes and walk away with their tails between their legs. A select few defy the odds, churning out profit after profit over long periods, building the wealth, security and wellbeing that others just dream about. So what separates these elite traders from the mediocre pack and how can you gain membership to this exclusive club?

First, let’s consider what isn’t required to become an elite trader. You don’t need to take special courses or move to Manhattan and work on Wall Street for a decade or two, although many elite traders follow that path. Nor do you need a huge stake to start your journey, because you already possess the tools for slow and steady wealth creation. Finally, you don’t need to trade in a prop shop environment, heading into work each morning to commiserate with other like-minded individuals.

So, what does it take to rise above the crowd and supercharge your trading results?

For starters, treat trading as a business, not a hobby or a slot machine. This takes effort, because most humans are burdened with deep-seated money issues that rise to the surface during risk-taking. Overcome these head winds by drafting a business plan that sets forth a budget for required tools, like real-time news and charts, as well as by listing the markets, instruments and strategies you’ll trade. Complete your plan with a realistic snapshot of monthly and yearly profit targets.

Keep detailed records of your trades, updating nightly and reviewing weekly for strategic adjustments. Supplement this work with a daily journal in which you post your observations and ideas, then draw upon the contents to add new features to your strategies and risk-control techniques. Once recordkeeping is in place, settle in for the long haul because you need to pay your dues over three to five years to gain the insight needed to compete with the predatory crowd moving modern markets.

Become a specialist as early as you can in your trading career, choosing specific markets and styles that suit your temperament and knowledge base. You’ll need to find and master multiple trading edges, in which positive results for specific strategies can be reproduced at will over dozens of positions. All effective edges have one thing in common – an effort is made to control risk before seeking profit. Master that single concept and you’ll be well on your way to elite status.

Choose information sources wisely. It’s easy to get caught up in the media circus, watching an endless parade of talking heads spout opinions that have no bearing on your daily workflow. Instead, turn off the television and subscribe to a real-time news service that gets you the facts, unimpeded by bias or emotion. Add a selective Twitter feed, following no more than 75 carefully curated sources and you’ll be watching the same news flow as Wall Street’s finest. 

Now comes the tough part. To become an elite trader, you need to learn from the best. That’s a tall order because self-proclaimed gurus are everywhere, hawking in their chat rooms and newsletters. Sadly, few of these folks have the information, experience or long-term track record you need to raise your trading game to elite status. However, rather than avoiding these folks while seeking a mentor, it’s better to sample as many teachers, styles and approaches as possible to find out what works for you … and what doesn’t. In the process, you’ll come across a handful of helpful teachers who will yield a lifetime of trading knowledge.

Your final task could be the hardest, depending on your current lifestyle. Once you’ve chosen to walk the elite path, you need to monitor personal habits and interpersonal relationships. Drug use, poor nutrition and insomnia undermine the mental faculties required to take money out of the market each day. Add in marital discord or fighting with parents and there will be even more chances for your money and your discipline to be lost through your positions.

Understand the deep connection between how you feel and your bottom line results. Financial markets are the worst place to deal with personal issues, so clean up your act and quit smoking, get to the gym and buy your spouse flowers. You’ve got important work to do and need to be at your best to trade at the top of your game.

The Bottom Line
The elite trader develops a serious approach to the financial markets, weighing risk against potential reward at all times. They hone their craft through detailed recordkeeping, carefully chosen data sources, well-defined trading edges and lifelong connections with mentors who will guide them to the next level of achievement.


Happy Investing
Source Investopedia

FPIs remain invested in Indian markets despite volatility

FPIs remain invested in Indian markets despite volatility

Foreign Portfolio Investors (FPIs) continued to stay put in the Indian equities market for the week ended March 20 despite the anxiety regarding the US Fed's stand on a rate hike possibility. 

The FPIs stayed invested in the Indian markets despite other issues like passage of key bills in the parliament session, concerns regarding the marginal increase in the retail inflation for February and the expected subdued March quarterly earning results. 

However, the US Fed took a dovish stand and said that the rate hike might take place in the later part of the year. This gave a major relief to markets such as India where the down side of the meet was being seen as an immediate or a near future rate hike announcement.

With higher interest rates in the US, the foreign portfolio investors (FPIs) are expected to be led away from the emerging markets such as India.

"The long term FPIs like pension funds and sovereigns understand the long term value of staying invested in the Indian market. There is no market in the world where the FPIs will get such an opportunity of growth and economic reforms process. After the dovish stand taken by the US Fed even the short-term investment-based hedge funds will find the Indian markets more attractive." 

The Indian markets have come a long way since the June 2013 period of extreme volatility due to tapering. Our economic macros are quite positive which show future growth. Even the Reserve Bank is quite active as to avoid any repeat of the June 2013 type volatility."

For the week ended March 20, the FPIs bought stocks worth Rs.1,952.36 crore or $312.46 million, according to the data with the National Securities Depository Limited (NSDL).

However, the foreign investors sold stocks worth Rs.1,159.96 crore or $184.82 million in the week under review. 

During the previous week ended March 13, the FPIs had bought stocks worth Rs.3,234.7 crore or $518.24 million. At that time they had off-loaded stocks worth Rs.957.61 crore or $152.69 million. 

The foreign institutional investors (FIIs) along with sub-accounts and qualified foreign investors have been clubbed together by market regulator Securities and Exchange Board of India (SEBI) to create a new investor category called FPIs.

"Flows remained positive overall in the equity markets from FII's (Foreign Institutional Investors) and DII's (Domestic Institutional Investors) and the possibility is that allocations towards India will be much more higher in the future."

"On the flip side we have seen crude oil prices head lower after a minor bounce this will smoothen the negative impact of the domestic data points."

The triggers for the FPIs in the coming week will be the concerns regarding the marginal increase in retail inflation for February which belied expectations of a rate cut next month.

The Reserve Bank of India is scheduled to announce its first bi-monthly policy review for 2015 on April 7.

"The FPIs will also await for the fourth quarter results, which are expected to be subdued."

The passage of several key bills like coal mines (special provisions), mines and minerals (development and regulation) and appropriation bill 2015-16 were also keenly observed by the FPIs.

Parliament has gone into a month long recess and will resume on April 20. 

The FPIs will keenly watch the ground level implementation of the various bills that were passed and any announcements regarding the post session reforms. 

Meanwhile, the Indian equities markets lost 242 points or 0.84 percent during the weekly trade ended March 20.

The benchmark 30-scrip Sensitive Index (Sensex) of the S&P Bombay Stock Exchange (BSE) fell 242.22 points or 0.84 percent during the weekly trade session ended March 20.

The Sensex ended March 20 trade at 28,261.08 points. For the previous weekly trade ended March 13, the BSE Sensex had closed at 28,503.30 points.

The consolidation in the Indian markets continued since the weekly close of March 13, when the S&P BSE Sensex plunged 945.65 points or 3.21 percent to its worst weekly fall in 2015.

Don't get swayed or hesitate by the ongoing market volatility, and continue investing in value stocks.

Happy Investing
Source Yahoo Finance

Five things to keep in mind while choosing retirement plan

Five things to keep in mind while choosing retirement plan


Retirement is one of the key life stages everyone needs to save for through working life. When you choose to retire from work, you should also be able to retire financially. It essentially means that your savings should be enough to sustain the lifestyle you desire even when you are not working. And you don’t generally desire to reduce your lifestyle from where you are when you retire. There are a plethora of options available for retirement planning. While each of these offers different features, retirement plans provide an ideal combination of both investment and protection.

All retirement or pension plans are structured in two parts. The first one is accumulation, when the policy holder pays the premium and the second one is distribution when he or she gets a regular income, through an annuity payout post retirement. So how do you decide which retirement plan is the best one for you?

Here are the top five parameters to keep in mind when finalising one for your golden years. 

1. Your investment should beat inflation - one of the most important factors of retirement planning is to ensure that your investment beats inflation as inflation eats into the value of your money over time.. This is because of inflation, which in its most simple terms is the general rise in the level of prices. Hence it is important to ensure that your retirement plan gives you real returns i.e. returns which are adjusted for inflation.

2. Complementary: Your plan should complement your existing retirement savings. In case you are overly invested in conservative instruments then your retirement plan should be focussed towards higher risk/return instruments.

3. Pension guarantee for self and spouse- Retirement is a goal which you share with your spouse. One key factor when evaluating a retirement plan is to check if it safeguards the completion of policy and guarantees pension for the spouse in case of an untimely death of the policy holder. Your retirement plan needs to cater to both yourself and your spouse. A good plan will ensure the benefit to your better half continues, even in your absence.

4. Benefits and bonus– it is worthwhile to check the additional benefits and bonus that you are being offered with your retirement plan. For example some plans may offer benefits like completion of the payment premiums for the spouse, in case of an untimely death of the policy holder, since your goals will still remain even if you don’t. You should also check if your retirement plan provides you the benefit of a loyalty bonus over the tenure as it helps you accumulate a larger amount for your retirement.

5. Flexibility - it is beneficial to start investing early in a retirement plan. However, the capacity to pay higher premiums may rise only over the years as income increases with growth in one’s career graph. Some plans also provide the flexibility of increasing contribution to the premiums through top-ups every year. Even as little as a 5% top-up each year over 25 years can increase your retirement corpus by as much as 50%. Guaranteed income option – No matter how much one saves, there is always a chance that one can run out of money. Therefore you need some basic income guaranteed for life. This is where you should look at annuity products which give you guaranteed income throughout your retired life. These products come in a number of options which one can choose as per the individual requirement.

Keeping the above things in mind while choosing your retirement plan will ensure that your investment caters to your needs and maximises your returns. Starting your retirement planning early and investing regularly can guarantee financially secure and carefree sunset years for you and your loved ones.

Happy Investing

3 midcaps best placed to gain from RBI rate cuts

3 midcaps best placed to gain from RBI rate cuts


Benefits of lower interest rate havn't yet had an impact on the ground with base rates yet to come down. At the same time, mere lower rates will not be sufficient to catalyse growth.

Focus needs to be on companies that have moderate leverage and can use rate cuts to increase growth in their business.

Below are the three key names that can leverage on 50bps YTD rate cut to grow their portfolio.

LIC Housing Finance : LICHFL' core mortgage business should see growth as mortgage rate cuts will likely add to demand especially in the middle income housing segment. Further the company has levers to grow its net interest margins over the next two years on the back of build up of high-yield portfolio. Valuations for the company are reasonable at 2.2x F17 P/B.

Sobha Developers : The company's foray into the middle-income housing segment is going to be a potential game changer. Based on channel checks, the company has registered strong demand in its maiden mid-income launch in Bangalore. Rate cuts will not only help grow affordable housing portfolio but also reduce interest outgo on its portfolio. Leverage on the company is reasonable at Net D/E at 0.7x.

Sintex : It has had strong revenue growth driven by improvement in custom moulding and prefab business. The company is levered to any uptick around marque government schemes such as Clean India/ housing for all etc. Capex in the business, however, continues to be high but revenue growth interest cover has now become reasonable with EBITDA/ net interest at 3.2x for 9MF15.


Happy Investing
Source:Moneycontrol.com

DLF to monetise properties worth Rs 15K cr to clear debt

DLF to sell properties worth Rs 15K cr in various projects


India's largest realty firm DLF plans to monetise properties worth about Rs 15,000 crore under various projects to boost its cash flow and reduce debt, a senior company official said. DLF had a net debt of Rs 20,336 crore at the end of the December quarter. "We have a total of Rs 14,000-15,000 crore stocks. Out of this, Rs 4,000 crore is in finished projects and more than Rs 10,000 crore is unsold stocks in projects which are launched and are under development," DLF Chief Financial Officer (CFO) Ashok Tyagi told PTI.

These stocks would get monetised as and when the demand picks up resulting in improvement in cash-flow as well as reduction of debt, he said when asked about the company's strategy to reduce the huge debt. Stating that sales have been "low" since last year, Tyagi said bookings would comfortably cross Rs 3,000 crore in this fiscal, lower than Rs 4,070 crore in the 2013-14 financial year. DLF has achieved sales bookings of about Rs 2,700 crore till February 15 of the current fiscal. With property market showing sluggishness, Tyagi said the company is looking to raise about Rs 3,000 crore by selling about 50 percent stake each in 4 housing projects to private equity firms. "Since sales are slow, we are planning to raise about Rs 3,000 crore through private equity. In the short term, PE funds will be the substitute for the cash flow which would have normally come from sales," Tyagi said. Tyagi said only about Rs 6,500 crore debt pertains to development arm DevCo and the same would be eventually reduced with monetisation of these Rs 15,000 crore worth stocks. On reducing of about Rs 14,000 crore debt pertaining to rental business RentCo, DLF CFO said the company plans to launch two Real Estate Investment Trusts (REITs) to monetise the rent-generating commercial assets.

The company earns an annual rental income of over Rs 2,000 crore from its office buildings and shopping malls covering about 30 million sq ft area. Last month, DLF had reported 9 percent decline in consolidated net profit at Rs 131.79 crore for the quarter ended December against Rs 145.29 crore in the year-ago period. Income from operations fell 5 percent to Rs 1,956.72 crore for the third quarter of this fiscal from Rs 2,058.42 crore in the corresponding period of the previous year.

Recently, Sebi slapped fines totalling Rs 86 crore on DLF, its top executives, their family members and various other related entities for entering into "sham transactions" to mislead IPO investors about eight years ago. DLF had said that it did not violate any laws and would challenge the order. The company had also said it was guided by the advice of "eminent legal advisors, merchant bankers and audit firms" while formulating its IPO documents. DLF has a land bank of about 295 million square feet, of which 50 million square feet is under development.

Happy Investing
source:Moneycontrol.com

Is the Indian market getting overheated?

Is the Indian market getting overheated?


The market yesterday hit an all time high, the Nifty hitting 9,000 not closing above that but the bulls would take that. It was till an all time closing high for the market. The midcaps have been outperforming but honestly yesterday was the first sign of a bit of a distribution phase in the market because you saw some of the high beta names getting a bit sold off the likes of Unitech , GMR , Suzlon . At the same time the stocks like Nectar Lifesciences , Rasoya Protein , HFCL all these were gaining ground. So I don’t know -- the quality of the rally now is a bit in question.

Not the long-term rally of this market -- this is a big bull market, make no mistake about that. However, there is just way too much consensus now about 9,200 on the Nifty, there is way too much consensus about taking long position every day. So that I think is making me a bit nervous about the market. Foreign institutional investors (FIIs) continue to buy but domestic institutional investors (DIIs) have been selling and in the past whenever there has been four-five days of DII selling matched by FII buying, the markets normally correct after that. So , if I am using the same analogy, the market may correct a bit and it won’t hurt you -- if you were to just take your profits and sit on the sidelines for a bit, if you are a trader. From an investment point of view, this is the market in which you should not liquidate your positions. The best example is TVS Motors which had a 25 percent correction and is almost back where it belonged. In these cases, you use dips to buy and keep on accumulating your stocks in the long-term portfolios but for a short-term, if you are a trading position holder, do not short this market yet but maybe time has come to book some longs, wait on the sidelines and then look for a trend to emerge because as of now, there is just way too much bullishness on the street and there is just way too much consensus sometimes that can be a bit dangerous.




Happy Investing
Source: Moneycontrol.com

NDA's first full-fledged Budget

 NDA's first full-fledged Budget

 

NDA's first full-fledged Budget was balanced between growth & fiscal prudence and saw a paradigm shift in its thinking to bring ideas of social security for the weaker section. It also expanded the savings pool by creating a fungibility mechanism to convert physical savings into financial savings. In its refined architecture, the government has realigned its relationship with the states by empowering them through higher devolution (62% of national revenue), which could be channelised towards on-the-ground spending.

 

Though fiscal roadmap has been stretched by a year, incremental deficit is being earmarked for infrastructure spending while a concrete mechanism to dissuade black economy is encouraging. Overall, the Budget addresses three strategic pillars of the economy by inter-weaving pro-poor, pro-growth and pro-investors agenda in the same breath. 

 

Key measures announced in this Budget

•  On the tax receipt front, the government is targeting 15.2% YoY growth in gross tax revenues for FY16E vs. 9.9% in FY15E and appears reasonable given the increase in indirect taxes (full impact of excise hike for petroleum products and hike in service tax). However, net tax revenues could grow 1% YoY in FY16E given cooperative federalism
•  Incidentally, the government for the first time highlighted its fiscal road map and aims to achieve fiscal deficit target of 3.9% in FY16E; 3.5% in FY17E and 3% in FY18E. Further, the quality of expenditure is also improving with a shift towards capital expenditure vs. revenue expenditure. Finally, though the government revised its FY16 fiscal deficit target to 3.9% vs. 3.6% pre-planned earlier, the incremental deficit is being utilised for infrastructure spending
•  A new bill would be introduced to tackle benami transaction and domestic black money. The enforcement agencies would be empowered to attach assets. Further, undisclosed income would be taxed at the maximum marginal rate.
•  Deductions and exemptions for such income will not be allowed while tax evasion could attract punishment of up to 10 years of rigorous imprisonment. The government also made quoting of PAN mandatory for transaction worth >1,00,000 

We believe the government's FY16E fiscal deficit target hinges on its disinvestment target of 69,500 crore. 

 

 Be bullish on domestic oriented sectors like automobiles, cement, capital goods, and banks. Defensive sectors like FMCG, pharma and IT could perform in line with broader markets.

Happy Investment

Your Asset Allocation Strategy : Make It Count

Your Asset Allocation Strategy : Make It Count
Making an asset allocation strategy and planning investments that is best suited for as you move ahead in your life could help you in realizing your financial and life-stage goals. Plan for your retirement from an early stage, the longer you invest, the better your chances of ending with an adequate and healthy retirement corpus even after meeting your all liabilities.

Young and Free - For unmarried individuals upto 25 years of age it is the best time in life to try and maximize your investments in equity to benefit from compounding in the long run..

Key Goals

• To Build a fund to meet emergencies.
• To Become financially independent.
• Planning for retirement.

Suggested asset allocation

• Diversified Equity funds – 80%
• Bonds / FDs – 10%
• Cash/Liquid fund – 10%

Just Married – For married individuals between 25 to 30 years of age, enjoy life and hence keep a little more sum in cash/liquid fund so you can meet emergencies without derailing your other financial goals.

Key Goals

• Saving for house.
• Planning for child.
• Planning for retirement.

Suggested Asset Allocation

• Diversified Equity Funds – 75 %
• Bonds/ FDs – 10%
• Cash/Luquid fund – 15%

Happy Family – For individuals between 30 to 40 years of age with family with one or two kids, it’s important to explore and enjoy the parenting but continue to maintain your investments to secure a bright future for the family. Continue maintaining your emergency fund but may plan to shift few percentage towards debt ie; Bonds/ FDs.

Key Goals

• Child’s schooling and higher education
• Saving for Retirement

Suggested Asset allocation

• Diversified Equity fund – 65%
• Bond/ FDs – 20%
• Cash/ Liquid fund – 15%

Mature family – Future Sense

For individuals between 40 to 50 years of age with teenage kids, to meet your immediate and near term goals related to child’s higher education and marriage you could gradually move money to debt and liquid funds.

Key Goals

• Child’s marriage.
• A second home for retirement.
• Saving for retirement.

Suggested Asset allocation

• Diversified equity fund – 50%
• Bond funds / FDs – 25%
• Cash/ Liquid fund – 25%

Sunshine Years/ Ageing Gracefully – For individuals between 50 to 60 years of age. Reducing equity investment in a tax efficient manner and increasing allocation to debt and liquid funds could bring predictability to your investments.

Key Goals

• Steady income stream in retirement.
• Money to travel and pursue hobbies.

Suggested Allocation

• Diversified Equity fund -30%
• Bonds/ Fds – 40%
• Cash/ Liquid Funds – 30%

Happy Investing

The Power of Compounding

The Power of Compounding


Explained through this educational video....


The Power of Compounding


Happy Investing

Investing Basics ..... retirement

Investing Basics ..... retirement

Investing Basics ... Mutual Funds explained in video

Investing Basics ... Mutual Funds ... video

Understanding Mutual Fund ..... The Pizza Way

Understanding Mutual funds .... The Pizza Way

Solving India’s gold smuggling conundrum – is it as easy as it seems?

Solving India’s gold smuggling conundrum – is it as easy as it seems?
Gold smuggling into India has increased considerably since the initial rise in import duty back in January 2012, which instigated the first recent wave of unofficial gold imports. The newest generation of officers have never previously exposed to gold smuggling at such levels, and the learning curve has been steep. The information system is technologically so intensive that it is difficult to make breakthroughs unless insiders are involved.

Some sources suggest unofficial imports could be as high as 400 metric tons. However, according to extensive field research from GFMS at Thomson Reuters, we estimate this parallel trade is closer to 120 metric tons.

The golden numbers

Explaining the numbers behind the smuggling trade is quite complex. To start, we need to define the following constants:
The price of gold at $1,200/oz
Customs Duty at 10%
Value Added Tax at 1%
Octroi (a local tax levied on imported goods) and Stamp Duty at 0.3%
Spot market premia of $15.40 an ounce (1.3% of $1,200)
Carrier charge of 1.2%
Hawala premia or dollar transfer of 3% (hawala is an unofficial channel used to transfer currency physically)

The primary revenue for the smuggler is the total duty he aims to evade, i.e. 11.3% valued at $135.60. Add to that the spot market premium of $15.40 an ounce (~1.3% of $1,200), and his gain is $151 for an ounce or 12.5%. In other words, gold that was bought at $1,200 gets sold in the domestic market for $1,350.50. Thus the gross earning is $150 per ounce.

On this basis, the cost of smuggling including the carrier charge is $14.40/oz, which in essence means the margin is 11%. However, after including the hawala premium of 3% (anecdotal evidence suggests this is common practice), the margin falls to 8%.

At the outset a margin of 8% may seem like a healthy profit, but this has to be evaluated against the value of gold that gets seized. Thus, the margin in value terms is Rs. 1,964/10 grams (difference between the spot rate and landed rate by smuggling) or 19,642/100 grams. The GFMS team at Thomson Reuters developed a scenario based on the percentage of gold that gets apprehended by customs, and its impact on profitability. It revealed that on apprehending just 1%, which means only 1 gram out of every 100 grams would have helped smugglers enjoy a profit of Rs. 34,355 from the other 99 consignments. As we scale this higher towards 7%, smugglers would not make any money over the longer term.

In reality, smugglers don’t import the same volume every time. They initially test the waters before gradually increasing volumes. Should a consignment be seized by customs then their costing spirals out of control. In most cases the offender is released on bail within 60 days, but the individual remains on the custom authority’s radar, making it difficult to recommence trade.

Melting through the cracks

Looking at the points of entry, there are 18 international airports in India. If we assume 7 kg is slipping past customs at each, the annual total is about 45 metric tons. Land borders and sea transport can add to these volumes, although Hawala transaction rates are higher here, due in part to local demographics. For instance, a border town like Moreh along the India-Burma border is a place largely inhabited by Tamil people, and Tamil Nadu is in the top three states for per capita consumption of gold.

Similarly, India shares a 4,000 kilometer stretch of border with Bangladesh, only half of which is known to be fenced. This border is susceptible to higher smuggling volumes, but it is important to note that the higher the volumes transported means higher the risk of loss. Similarly, unofficial flows through Nepal and Pakistan face the same challenges.







Happy Investing

SOURCE: Thomson Reuters